A federal judge this week tossed a defamation lawsuit by reformed gangster Cornell Jones, whom the D.C. attorney general has accused of misappropriating more than $300,000 from the city’s HIV/AIDS program for renovations on a proposed job-training center that instead was used to open a strip club.

U.S. District Judge Robert L. Wilkins ordered Tuesday that Mr. Jones‘ lawsuit claiming equal rights violations also be dismissed and denied a motion by Mr. Jones to amend his complaint.

Mr. Jones‘ attorney, Jimmy A. Bell, said Wednesday that Mr. Jones will appeal the ruling on the equal rights claim and will consider refiling the defamation claim in D.C. Superior Court.

Mr. Jones filed his lawsuit days after Attorney General Irvin B. Nathan filed a false-claims suit against him and his nonprofit group Miracle Hands, stating that they improperly received $329,000 in city funds for renovations at a warehouse in Northeast that now houses the Stadium Club, which advertises “Five Star Dining and a Premier Gentleman’s Club Experience.”

The grants, which originated from the Department of Housing and Urban Development and were distributed by the District’s HIV/AIDS Administration, required that the warehouse be converted into a job-training facility for people with HIV/AIDS, according to the attorney general’s office.

In his lawsuit, Mr. Jones said he and Miracle Hands received city approval to restore a nearby warehouse while providing job-training classes at the original rehab site and that the District discriminated against him when officials redirected his group’s funding to another organization that “was not African American run or owned.”

His lawsuit further stated that District funds never went to a strip club, “but the owner sold it to a guy that started a strip club at the same site.” Property records show Mr. Jones sold the warehouse in 2010 to the Stadium Club’s owners, politically connected developer Keith Forney and Baltimore businessman James “Tru” Redding, for $2.7 million.

According to the lawsuit, the District failed to take the address of the original site off its website listing for Miracle Hands, so it was “directing people to the strip club for job training, accidentally.”

Then, in August, when Mr. Nathan filed his lawsuit, which seeks $1 million in damages and accuses Mr. Jones and Miracle Hands of unjust enrichment and submitting false expenditure reports in violation of the District’s False Claims Act, he “issued a press release to the public and to the media that made false defamatory statements” about Mr. Jones and Miracle Hands, the lawsuit stated.

Meantime, the renovations at the second rehab site were never completed, the attorney general’s office said at the time.

City financial records show that Miracle Hands received more than $5.8 million in D.C. funds from 2000 through February 2011. Updated figures were not available at press time for this story. The organization is now located on H Street Northeast, in the historic Atlas District.

The attorney general’s lawsuit was prompted by a request for investigation in 2011 from council member David A. Catania, at-large independent, after The Washington Times published a series of articles showing that a liquor license was transferred to the original rehab site during a time when Miracle Hands was receiving city grants intended for a job training facility.

On Wednesday, a spokesman for Mr. Catania said in an email, “Councilmember Catania’s original request was for the attorney general to investigate whether District funds were used for their intended purpose: to benefit people suffering from HIV/AIDS. His expectation was, and continues to be, that if the funds were determined to have been used improperly that the attorney general would vigorously pursue the return of the full sum.”

The attorney general’s lawsuit is pending in D.C. Superior Court and is scheduled for mediation, according to court records, though no date has been set.

Mr. Jones is a convicted drug trafficker immortalized in the Black Entertainment Television series “American Gangster.”